United States Of America v. Mangiardi et al
Filing
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OPINION and ORDER denying 8 Motion to Dismiss Document. Signed by Judge Kenneth A. Marra on 7/19/2013. (ls)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 13-80256-CIV-MARRA
UNITED STATES OF AMERICA,
Plaintiff,
vs.
MAUREEN G. MANGIARDI and GERARD
C. MANGIARDI,
Defendants.
_____________________________________/
OPINION AND ORDER
This cause is before the Court upon Defendant Maureen G. Mangiardi’s Motion to
Dismiss (DE 10). The motion is fully briefed and ripe for review. The Court has carefully
considered the Motion and is otherwise fully advised in the premises.
I. Background
Plaintiff United States of America (“Plaintiff”) brings this case against Defendant
Maureen G. Mangiardi1 (“Defendant”) pursuant to 26 U.S.C. § 6324(a)(2). The allegations of the
Complaint are as follows:
Decedent Joseph L. Mangiardi (“decedent”) died testate on April 5, 2000. (Compl. ¶ 7.)
Defendant is decedent’s daughter and is co-trustee of his will and of an inter vivos revocable trust
that was part of decedent’s Estate (the “Estate”) for federal estate tax purposes. (Compl. ¶ 4.)
The federal estate tax return (IRS Form 706) for the Estate was filed July 5, 2001, and reported a
gross estate tax of $8,050,042.00. The net federal estate tax reported was $2,621,810.00.
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(DE 25.)
On April 15, 2013, Plaintiff dismissed Defendant Gerard C. Mangiardi from this action.
(Compl. ¶ 8.) The majority of decedent’s assets were included in the Estate for federal estate tax
purposes, but were not subject to probate before the probate court. The gross estate for federal
estate tax purposes included assets held in an inter vivos revocable trust created pursuant to
decedent’s trust agreement, dated February 13, 1998. According to the estate tax return, the total
value of the trust, which primarily consisted of stocks, was $4,577,360.00 as of the alternative
valuation date. Upon decedent’s death, Defendant and two other of decedent’s children became
co-trustees of the inter vivos trust. (Compl. ¶ 9.)
The gross estate also included an Individual Retirement Account (“IRA”). According to
the estate tax return, the total value of the IRA, which primarily consisted of stocks, was
$3,857,576.00 as of the date of decedent’s death. (Compl. ¶ 10.) The Internal Revenue Service
(“IRS”) selected the Estate’s federal estate tax return for examination. As a result of the
examination, on December 22, 2003, the IRS made an abatement of the tax in the amount of
$143,152.00. Accordingly, the net estate tax due was reduced to $2,478,658.00. (Compl. ¶ 11.)
Pursuant to 26 U.S.C. § 6161, the Estate requested, and was granted, six extensions of
time to pay the tax due. (Compl. ¶ 12.) The Estate based its extension requests on the ground
that the majority of the assets to be used to pay the estate tax were marketable securities held in
the inter vivos trust that were undervalued due to depressed market and economic conditions, and
thus the liquidation of these assets would result in substantial losses. For instance, in its
December 2002 request for an extension, the Estate represented that the value of the trust had
decreased to $552,699.00. The Estate stated its intention to hold the securities until their value
increased, at which time it would liquidate them and use the proceeds to pay the federal estate tax
due. In fact, however, the Estate did not simply hold onto the securities and wait for them to
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increase in value. Instead, the co-trustees, including Defendant, engaged in active trading of
securities throughout the periods of extension, while paying themselves hundreds of thousands of
dollars in fees. (Compl. ¶ 13.)
On or about July 13, 2006, the IRS served a levy notice on the Estate for the unpaid estate
taxes. On or about August 13, 2006, the Estate requested and obtained an administrative
collection due process hearing. The IRS Office of Appeals sustained the levy action, and the
United States Tax Court affirmed that decision on January 27, 2011. The Estate appealed the
Tax Court’s decision and, on or about October 12, 2011, the Court of Appeals for the Eleventh
Circuit affirmed in an unpublished opinion. (Compl. ¶ 14.) To date, the Estate has paid only
$250,000.00 in estate taxes. A payment of $200,000.00 was made in December 2001, and a
payment of $50,000.00 was made in April of 2004. (Compl. ¶ 15.) The Estate is currently
insolvent, and has inadequate assets to pay the federal estate tax balance. (Compl. ¶ 16.) The
Estate has not paid the remainder of the tax due, which currently exceeds $3 million. (Compl. ¶
17.)
The IRA account was held separate and apart from the inter vivos trust and was not under
the control of the co-trustees. (Compl. ¶ 18.) Upon decedent’s death, the assets of the IRA were
automatically distributed to the decedent’s beneficiaries, including each of his nine children.
According to the federal estate tax return, Defendant received 11.11% of the assets of the IRA,
and a total of $416,438.00 from the Estate. (Compl. ¶ 19.)
Defendant moves to dismiss the Complaint, claiming that Plaintiff has failed to take
timely action under 26 U.S.C. § 6901. Defendant also claims that if section 6901 does not apply,
the statute of limitations under section 6503, which applies to section 6324, has expired.
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Plaintiff responds that an assessment under section 6901 is not a condition precedent to a
transferee suit under section 6324. Plaintiff also contends that a suit to recover transferee
liability is timely filed as long as a suit directly filed against the transferor would be timely and
the ten-year period for commencing such a suit was extended and has not yet expired.
II. Legal Standard
Rule 8(a)(2) of the Federal Rules of Civil Procedure requires “a short and plain statement
of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The Supreme
Court has held that “[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not
need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds’ of his
‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do. Factual allegations must be enough to raise a right to
relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(internal citations omitted).
"To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S.
Ct. 1937, 1949 (2009) (quotations and citations omitted). "A claim has facial plausibility when
the plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged." Id. Thus, "only a complaint that states a
plausible claim for relief survives a motion to dismiss." Id. at 1950. When considering a motion
to dismiss, the Court must accept all of the plaintiff's allegations as true in determining whether a
plaintiff has stated a claim for which relief could be granted. Hishon v. King & Spalding, 467
U.S. 69, 73 (1984).
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III. Discussion
A. 26 U.S.C. § 6901
The Secretary of Treasury is authorized to assess any tax determined to be due upon a
review of a taxpayer’s return. 26 U.S.C. § 6201(a)(1). For an estate, the IRS must assess the
liability within three years of the filing of the estate tax return and the time for assessment may
not be extended by agreement.2 26 U.S.C. § § 6501(a), 6501(c)(4)(A). Within 60 days after
assessment, the IRS must serve a notice and demand for payment. 26 U.S.C. § 6303(1). If the tax
remains unpaid after notice and demand, “such tax may be collected by levy or by a proceeding
in court, but only if the levy is made or the proceeding begun . . .within 10 years after the
assessment of the tax . . . .” 26 U.S.C. § 6502(a)(1). Generally, if a person liable for a tax does
not pay after notice and demand, a lien arises in favor of the United States on all of the person’s
property and rights to property. 26 U.S.C. § 6321. Section 6324 of Title 26 provides that a lien
in favor of the United States is automatically created on the decedent’s gross estate immediately
upon death that lasts for 10 years. 26 U.S.C. § 6324(a)(1). If the estate transfers property, the
lien remains with the transferred property and the transferee takes the estate’s assets subject to
the special lien. 26 U.S.C. § 6324(a)(2). In addition to the lien, section 6324 creates personal
liability on any transferee of property included in the decedent’s gross estate to the extent of the
value, at the time of decedent’s death, of such property. 26 U.S.C. § 6324(a)(2).
Section 6901 of Title 26 provides for the assessment and collection of amounts for which
a transferee is liable and, except as otherwise provided, is to be assessed, paid and collected in
2
Defendant does not dispute that the assessment of the estate tax against the Estate was
timely made. (Mot. at 12.)
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the same manner and subject to the same limitations as would apply to the estate tax. 26 U.S.C. §
6901(a)(1)(A)(ii). The statute of limitations against the transferee is calculated as the normal
three year statute under section 6501, plus an additional year. 26 U.S.C. § 6901(c). Thus, if
section 6901 were to apply, the liability of the transferee of the Estate should have been assessed
no later than July 5, 2005.
Defendant argues that the IRS is required to follow section 6901 and cannot proceed
separately under section 6324. Defendant posits that section 6901 provides the exclusive
procedure to assess liability against a transferee and must do so within four years of the filing of
the estate tax return. Plaintiff disagrees, stating that an assessment under section 6901 is not a
condition precedent to a transferee suit under section 6324.
Numerous courts have ruled that section 6901 is not a prerequisite to an action to impose
transferee liability under section 6324(a)(2). See, e.g., United States v. Geniviva, 16 F.3d 522,
525 (3d Cir. 1994) (“we hold that an individual assessment under 26 U.S.C. § 6901 is not a
prerequisite to an action to impose transferee liability under 26 U.S.C. § 6324(a)(2)”); Culligan
Water Conditioning of Tri-Cities, Inc. v. U.S., 567 F.2d 867, 870-71 (9th Cir. 1978) (“Section
6901 provides the Service the power to use against a transferee the same summary collection
procedures it may use against a transferor or any other delinquent taxpayer. But that section is not
mandatory, as appellants suggest; rather, it adds to other methods available for collection.”);
United States v. Russell, 461 F.2d 605, 606 (10th Cir. 1972) (“collection procedures contained in
§ 6901 are not exclusive and mandatory, but are cumulative and alternative to the other methods
of tax collection recognized and used prior to the enactment of § 6901 and its statutory
predecessors”); U.S. v. Motosko, No. 8:12–cv–338–T–35–TGW, 2012 WL 2088739, at * 2 (S.D.
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Fla. Apr. 19, 2012) (“the collection procedures contemplated by 26 U.S.C. § 6901 [are] not the
exclusive or mandatory remedy for the Government in seeking to collect taxes from a
transferee”); United States v. Matzner, No. 96–8722–CIV, 1997 WL 382126, at * 1 (S.D. Fla.
Mar. 26, 1997) (“The summary collection procedures provided for [under 26 U.S.C. § 6901] are
not the only collection procedures available to the Government in seeking to collect a tax from a
transferee.”).
Defendant argues that these cases were wrongly decided and rest on a misinterpretation of
a United States Supreme Court case, Leighton v. United States, 289 U.S. 506 (1933). According
to Defendant, Leighton involved whether the government was required to proceed under section
280 of the Revenue Act of 1926 (the predecessor to section 6901) to collect income tax of a
dissolved corporation from its shareholders or whether the government could bring a suit in
equity against the shareholders. Defendant claims Leighton should not have been followed by
these courts (or this Court) because that suit was brought in equity whereas the cases before the
other courts and this Court were brought in law. However, given the merging of law and equity,
the Court does not find the distinction made by Defendant compelling. Cf. Patterson v. Sims,
281 F.2d 577, 580 (5th Cir. 1960) (the predecessor section 6901 “does not create or define a
transferee's substantive liability, but simply provides a new procedure, in lieu of an action at law
or bill in equity, by which the Government may collect taxes directly from a transferee of
property of a taxpayer) (emphasis added). 3 Furthermore, to the extent Defendant relies on
3
The decisions of the United States Court of Appeals for the Fifth Circuit, as that court
existed on September 30, 1981, handed down by that court prior to the close of business on that
date, shall be binding as precedent in the Eleventh Circuit, for this court, the district courts, and
the bankruptcy courts in the circuit. Bonner v. Pritchard, 661 F.2d 1206, 1207 (11th Cir. 1981)
(en banc).
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district court cases from outside this district (Mot. at 16), those cases are not binding nor
persuasive.
Equally unpersuasive is Defendant’s argument that the legislative history of section 6901
indicates that it was intended by Congress to be the exclusive means for enforcing liability
against transferees. (Mot. at 18 citing Report, Senate Finance Committee (S. Rep. No. 52, 69th
Congr., 1st Sess. 30; H.R. Conf. Rep. No. 356, 69th Cong., 1st Sess. 43-44)). Notably, the United
States Supreme Court considered this same legislative history in Commissioner of Internal
Revenue v. Stern, 357 U.S. 39 (1958), and concluded that the predecessor to section 6901
“neither creates nor defines a substantive liability but provides merely a new procedure by which
the Government may collect taxes.” Id. at 42.
For the foregoing reasons, the Court rejects Defendant’s argument that Plaintiff was
required to make an assessment under section 6901 as a condition precedent to this section 6324
action.
B. 26 U.S.C. § 6324
An estate tax return is due nine months after the date of death. 26 U.S.C. § 6075. “Where
the assessment of any tax imposed by this title has been made within the period of limitation
properly applicable thereto, such tax may be collected by levy or by a proceeding in court, but
only if the levy is made or the proceeding begun (1) within 10 years after the assessment of the
tax.” 26 U.S.C. § 6502(a)(1). Section 6161(a)(2) permits the IRS to extend the time for payment
of the amount of tax shown on a estate tax return “for a reasonable period not in excess of 10
years from the date prescribed by section 6151(a) for the payment of the tax.” 26 U.S.C. §
6161(a)(2). “The running of the period of limitation for collection of any tax imposed by
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chapter 11 shall be suspended for the period of any extension of time for payment granted under
the provisions of section 6161(a)(2) or (b)(2) . . . .” 26 U.S.C. § 6503(d). The statute of
limitations is also tolled when a taxpayer seeks review of a proposed levy in a collection due
process proceeding. 26 U.S.C. § 6330(e).
Decedent died on April 5, 2000. (Compl. ¶ 7.) The parties agree that the tax was
assessed on August 20, 2001. (Mot. at 8; Resp. at 19 n.3) The Estate requested and was granted
six extensions of time to pay the tax due, extending the time to pay until December 5, 2004.
(Compl. ¶ 12.) Under these facts, the suspension extended the collection period from August
20, 2011 to July 20, 2015.
Defendant, however, claims that the extensions of time were made for the Estate to pay
its tax, and not for Defendant (as transferee), and that the suspension provisions do not apply to
transferee liability which is a separate liability from an estate tax. This argument was addressed
in United States v. Kulhanek, 755 F. Supp. 2d 659 (W.D. Pa. 2010). In that case, the decedent’s
children received distributions from the decedent’s retirement account. Id. at 660. The United
States filed suit against the children more than ten years after the estate tax lien arose, but within
the ten-year collection period as extended under section 6503. Id. Finding the suit was timely,
the court stated that “because the transferee’s liability is derivative of the transferor’s, courts
addressing the limitations period applicable to Section 6324(a)(2) ‘have looked at the generally
applicable statutes of limitations created under § 6501 and § 6502 of the IRC, and they have
reasoned that if the suit would be timely brought against the donor under these provisions, it will
be considered timely against the donee or transferee.’” Id. at 663 (quoting United States v.
Botefuhr, 309 F.3d 1263, 1277 (10th Cir. 2002)); see also United States v. Wright, 57 F.3d 561,
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(7th Cir. 1995) (in the partnership context, finding that if a suit against a taxpayer would be
timely, it is also timely against those derivatively liable.) This reasoning makes sense, given that
transferee liability under section 6324 is triggered by the estate’s failure to pay the estate tax
“when due.” 26 U.S.C. 6324(a)(2).
Defendant asserts that because section 6324 does not provide the liability of a transferee
is a tax liability, but rather imposes an obligation on the transferee to satisfy the underlying tax
liability of the transferor estate, the transferee’s liability is separate and apart from that of an
estate. Thus, Defendant claims the statute of limitations is not derivative. (Mot. at 23 citing
Baptiste v. C.I.R., 29 F.3d 1533, 1541 (11th Cir. 1994)). The Court rejects Defendant’s
contention. Baptiste states that while section 6324(a)(2) may not create a tax liability, there is
instead an “independent personal obligations which, pursuant to section 6901(a), may be
collected in a manner similar to that employed in collecting tax liabilities.” Id. At the same time,
however, Baptiste also held that the transferee was liable for interest on the underlying obligation
without limit from the due date of the estate tax return for his father’s estate. Id. at 1542. Given
that the transferee’s liability for interest was derivative, the Court sees no reason why the statute
of limitations is not also derivative.
For the foregoing reasons, the Court concludes that the limitations period to collect tax
from Defendant, as transferee, is no different than the limitations period to collect it from the
Estate.
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IV. Conclusion
Accordingly, it is hereby ORDERED AND ADJUDGED that Defendant’s Motion to
Dismiss (DE 10) is DENIED.
DONE AND ORDERED in Chambers at West Palm Beach, Palm Beach County,
Florida, this 19th day of July, 2013.
______________________________________
KENNETH A. MARRA
United States District Judge
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